Sectoral Growth and Developments within the Financial Sector: Evidence from Selected Sectors in Turkey

Ahmet Cemil Borucu, Veysel Ulusoy

Abstract

This paper examines the effects of developments in the financial sector upon real sector growth based on data from 2003 to 2011 in Turkey. During this period, following a severe banking crisis, banks changed their operating model from channeling funds to finance government debt to increasing and maintaining their loan portfolio to business entities and real persons. Moreover, strict regulations were imposed by the newly established banking regulation authority. The results of the study are in line with existing growth literature that argues that financial deepening is positively related with growth. In addition, we find that sector-based non-performing loans are negatively related to real sector growth, whereas net interest margins are positively related to it. These results are also in line with expectations.

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.